Euro Area Household Consumption to Increase in 2026 -Fitch
Household consumption continues to rise steadily across the euro area as the economy outperformed Fitch Ratings’ expectations in 2025, increasing by 1.5%, and Fitch expects a similar rate of expansion in 2026.
“We forecast a decisive return to growth in Germany, where fiscal stimulus will lead to a recovery in investment”, Fitch said, noting that real wages have recovered their pre-COVID-19 pandemic high, lower inflation is supporting purchasing power, and the household savings rate appears to have peaked.
The rating agency highlighted that consumers have been eager to rebuild savings eroded by inflation, amid greater economic and political uncertainty.
But lower interest rates make saving less compelling, fears of unemployment have ebbed, while rising equity markets have generated a wealth effect. Euro area unemployment is close to its historic low at 6.2%, and analysts no longer expect any large rise.
Labour demand has cooled, with employment growth slowing to an annualised pace of 0.7% in 3Q25, but labour force participation has slowed in tandem.
Unemployment in Germany and France is above its 2022 lows, while it will continue to fall in Italy and Spain. It forecast job growth will resume in Germany.
Fitch said lending to euro area households is rising again, and credit standards are easing, though not uniformly across countries.
“Our forecast of a steady ECB policy rate and little change in longer term rates implies little change in the household interest service burden”, Fitch said, noting that Debt as a share of disposable income has stabilised well below its 2019 level.
Fitch surveys indicate that consumer confidence is recovering, though it remains below average.
The performance of consumer ABS securities remains relatively solid despite recent economic challenges. Fitch expects low unemployment to support borrower incomes and keep credit card default rates and charge-off rates in check. The same factors are supporting prime RMBS performance. NTB Settlement Drags Banking System liquidity, Rates Mixed
